Tuesday, May 31, 2016

When we invest in a SaaS startup, which almost always happens at the seed stage, the next big milestone on the company’s roadmap is usually a Series A. If you carry this thought further and assume that the biggest goal after the Series A is to get to the Series B (and so on, you get the idea) it sounds like turtles all the way down. But financing rounds are obviously not a goal in itself. They are a means to a bigger goal. Some SaaS companies got big without raising a lot of capital – Atlassian, Basecamp and Veeva are probably the most famous examples. But they are exceptions, not the rule. According to this analysis of Tomasz Tunguz, the median SaaS company raises $88M before IPO.

Below is my back of a (slightly bigger) napkin answer to this question.

A few important notes:

The assumption of the information in the table is that the founding team is relatively “unproven”. Founding teams with previous large exits under their belts can raise large seed rounds at very high valuations on the back of their track records and a Powerpoint Keynote presentation.

Some of the information is tailored to enterprise-y SaaS companies. If you have a viral product (like Typeform or infogram), some of the “rules” don’t apply.

If you have virality and a proven founder team, you’re Slack and no rules whatsoever apply. :)